Fixed-Price Is Already Here: No Need to Panic

Federal fixed-price is already here. The recent EO on Promoting Efficiency, Accountability, and Performance just gave it teeth. I presented on the topic at a recent GovCon Ideators session, but wanted to share my analysis more broadly. 

What just changed 

• The EO reinforced Federal preference for fixed-price and performance-based contracts - but now also makes those contract types the default.  

• Agencies must justify and elevate approvals for cost-type, T&M, and LH contracts, especially at higher dollar thresholds. For Civilian agencies (except DHS and NASA), that threshold is a low $10M. 

• The Administration’s argument: cost-reimbursement tolerates vague deliverables, cost expansion, and ineffective performance incentives; fixed-price provides the Federal buyer cost control.  

Reality check: Don’t panic 

• GAO reporting shows fixed-price was already the dominant contract type by obligation, with cost-type at roughly half that volume and T&M/LH trailing behind.  

• Translation: You’re not entering a brand-new world; you’re operating in a world where the existing preference now has sharper teeth, more approvals, and more oversight.  

Where you feel it first 

• Larger contracts will be scrutinized first. Then we expect the change to roll down through each agency: from Top 10 non-FP contracts (by July 29^th) to Top 250 and so on. 

• Recompetes or options on existing cost-reimbursement contracts will get scrutiny and pressure to convert at least portions to fixed-price or incentive structures.  

• New solicitations will lean harder into fixed-price CLINs, performance metrics, and measurable outcomes—even for services and research-heavy work.  

How to think about fixed-price structures 

Fixed-price as defined in the FAR is more flexible than many teams assume. Three common methods for structuring work to manage uncertainty and risk follow.  

• Fixed by milestones or phases 

• Example: data collection complete, stakeholder interviews finished, stories drafted. 

• Services packaged as “productized” offer, such as Phase 1 (diagnostic), Phase 2 (design/pilot), Phase 3 (scale/optimize) - each as its own fixed-price package 

• Government (especially DoD/W) may prefer alternatives because milestones do not tie directly to desired outcomes. 

• Easier for program offices to understand, budget, and defend in an approval chain that now prefers fixed-price.  

• Good for research and communications projects where you can define clear phases but final outputs may evolve.  

• Fixed by deliverable 

• Example: a finalized report, a dashboard, or the release of a new application.  

• Works well when scope and acceptance criteria can be tightly defined up front.  

• Fixed by output or (better yet) outcomes 

• Example of outputs: number of service tickets closed, improved citizen satisfaction  scores, or increased volume of citizens served.  

• Example of outcomes: documented cost savings, specific uptime/availability rates, declines in defect rates, improved patient health measures 

• This aligns naturally with performance-based and incentive structures highlighted in the EO.  

Where fixed-price wins or fails 

Scope discipline and effective management will make or break you. The EO just raised the stakes.  

• Encourage Statements of Objectives (SOOs) or Problem Statements (BAAs or CSOs) where possible, so you can propose innovative and cost-efficient solutions without being trapped in overly prescriptive tasks by a detailed government-designed Scope of Work (SOW).  

• Make cost drivers explicit in your assumptions (volume of users, number of interviews, number of sprints, number of environments, etc.).  

• Clearly state what is in and out of scope with acceptance criteria and change mechanisms that are easy for the CO and COR to administer.  

Example: Instead of “support stakeholder engagement,” you specify “facilitate up to 12 virtual workshops with up to 40 participants each, with summary notes and action items within 3 business days.”  

Every metric for payment, whether milestone, deliverable, output, or outcome should be a SMART goal. Consider including:  

• Metric and target (e.g., 99.5% uptime, 20% reduction) 

• Measurement method and data source (tool, system of record, survey) 

• Timeframe (per month, rolling quarter, within X days) 

• Scope and exclusions (which systems/facilities, what counts as an exception) 

Be sure to stagger outputs and outcomes across life of project to minimize your financing costs before payment. 

Management discipline becomes more critical than ever for firms used to T&M or CPFF. PMP and libraries provide much easily available guidance for those who want to go deeper.  

Actions for the next 90 days 

1. Map your vulnerable portfolio 

2. Identify current cost-reimbursement, T&M, and LH contracts where you are likely to see pressure to convert to fixed-price or outcomes-based structures.  

3. Flag where scope volatility, emerging requirements, or external dependencies make full conversion risky—and where partial fixed-price (e.g., certain CLINs) is realistic.  

4. Start those conversations, share talking points with your COR and CO early. 

5. Upgrade your pricing playbook 

6. Make sure you have a strong pricer or cost strategist – and ideally past project data for analysis. 

7. Build standard fixed-price templated core offerings: typical milestones, deliverables, and outcomes with associated assumptions.  

8. Train BD, capture, and solution teams in Real World Capture^© - to think in terms of performance metrics, not just hours and labor categories.  

9. Rehearse the conversation with government buyers 

10. Be ready to explain how your fixed-price structure reduces administrative burden, clarifies risk, and ties your profit to mission results.  

11. Offer options: a baseline fixed-price scope plus clearly priced add-ons if volume or complexity changes. Or consider BPAs, which allow for call orders that are more easily priced. 

What’s Next?  

• On June 14^th, OMB and OFPP guidance pushed agencies to issue internal training and policies.  The guidance also instructed agencies to begin review of their existing costtype contracts (starting with the 10 largest by dollar value at each agency) and identify where those contracts can be converted to fixedprice or structured with performancebased incentives. 

• What does this mean for your project portfolio? How might you adjust capture strategy on your major pursuits and recompetes? If you’d like to learn more – or just want a referral to a great pricing strategist -, schedule a quick call with us.